Short sales in real estate have been around for quite some time but have become more common over the last couple of years. A short sale has benefits for both the lender and homeowner. Mortgage lenders look at the short sale as an alternative to foreclosure and are usually willing to accept a smaller pay-off to simply minimize its loss rather than go all the way down the long and costly road of foreclosure. The financial hit the lender takes on the short sale is much smaller compared to the expense of foreclosing on the property.
A Short Sale Is………..home is sold for less than the mortgage owed on it and lender forgives the remaining debt.
Benefit for the homeowner……………..
- less damage to your credit history than in a foreclosure
- no outstanding debt on the house
Consult with your accountant - the Internal Revenue Service often considers short sales as a relief of debt and may treat it as income.
It is the goal of the lender to get as much money out of the short sale as possible and minimize their loss. If there is a second lien holder on the property, more negotiations will be needed and the second lien holder may not agree to a short sale and you would be stuck with that remaining debt.
If you think you are in a short sale situation, check with your lenders loss mitigation department. Find out if they are willing to consider a short sale and ask how to initiate the process.
Most lenders require a short sale or hardship letter. This letter explains the borrowers situation and financial circumstances that makes it difficult for the borrower to continue making a mortgage payment. A lender does not want to see a homeowner who wants to walk away from their committment just because the home is no longer worth the amount the borrower paid for it. While being upside-down is one of the qualifications of a short sale, a lender will probably not grant the short sale solely on that basis.
Once you have spoken with your lender, you will need a real estate professional that has experience in the short sale process.
Have questions regarding a St. Louis short sale? I have the experience you need to navigate the waters of a short sale.